Many
charity trustees need to review their cash management arrangements
urgently in the wake of the Budget, the head of one of the
UK's largest charity investment manager has warned.

The Treasury Committee’s first Report in a series
on the Banking Crisis, released earlier this month, recommended
that all charities should be compensated for losses incurred
as a result of the collapse of the Icelandic banking system.

The chancellor failed to commit to this, however, in the
Budget.

Michael Quicke, chief executive of CCLA, said: “The
chancellor's decision not to refer to the Treasury Committee’s
recommendation in the budget will leave many charities in
a continuing state of uncertainty. But it is clear that,
even if a future announcement is made, this will be a one-off
concession, making it even less likely that charities can
rely on compensation schemes if they take these risks in
the future.”

One of the fundamental obligations of trustees is to safeguard
their charities' assets for current and future beneficiaries.
But the pressure to generate short term income has tempted
some, knowingly or otherwise, to put their cash at risk
in pursuit of the highest interest rates.

“Most charities don't have the time or expertise
to manage all the risks, and most are not large enough to
control those risks by using many different banks,'”
said Quicke. But he added: “It is possible to get
competitive rates of interest without losing the focus on
security.”

He offered the following three action points for trustees:
“Don't over-commit to any one bank. Your cash flow
projections might say you can lock up deposits for many
months, but banks have got into trouble in less time than
that.

"If you are not big enough to spread your cash reserves
across a number of banks and keep them under review, use
a pooled deposit fund that does this for you.

Finally, keep a record of trustee discussions and decisions
on cash management policy. If something does go wrong, this
will help you to demonstrate that you were unlucky rather
than careless.”